Beneficiary Designation (Bezugsrecht)

Concept

A beneficiary designation is the policyholder’s contractual instruction as to which person should receive the benefit from a life insurance policy on survival or death. If no express beneficiary is designated, the benefit on death typically falls into the estate and is thus subject to the rules of inheritance law; an express beneficiary designation, by contrast, allows the policyholder to direct the benefit specifically and independently of statutory or testamentary succession to a chosen person.

Revocable and irrevocable designation

Under a revocable designation, the policyholder can unilaterally change or withdraw the beneficiary at any time; the designated person does not yet acquire a secured legal position before the insured event occurs. Under an irrevocable designation, the policyholder waives their right of revocation, so that the designated person acquires their own secured claim as soon as the designation is made, over which the policyholder can no longer unilaterally dispose; an irrevocable designation is frequently used to secure loans (in conjunction with an assignment/pledge) or as part of family-law arrangements.

Relevance for insurance practice

Properly structuring the beneficiary designation is a key tool of estate and financial planning, since it enables a swift and targeted payout outside a potentially lengthy probate process; intermediaries should routinely prompt clients to review the currency of their beneficiary designation on major life events (marriage, divorce, birth of a child).